There are a lot of questions about Chapter 11 bankruptcy. It’s often an option that is considered when debts are already substantial, so there can be a lot of emotion behind the consideration to file. Understandably, you would have questions; the process to someone outside of the system can be confusing.

We thought we’d help put your mind at ease by asking some of the most frequent questions we receive regarding chapter 11 bankruptcy. Of course, if you have questions of your own, don’t hesitate to reach out to us.

What is Chapter 11 Bankruptcy?

In a nutshell, Chapter 11 bankruptcy is a “breath of fresh air.” It’s meant to be an indefinite period free of collectors where you can reorganize your finances and get things back on track. Furthermore, this reorganization occurs under the supervision of a bankruptcy court, giving you oversight as well as insight into the rehabilitation of your finances.

Who Can File Chapter 11?

The great thing about Chapter 11 is that both individuals and companies can file.  Chapter 11 is used primarily by businesses but individuals may be eligible. The only exception to this rule is that trusts cannot file, while business trusts can.

What Are the Common Reasons for Filing Chapter 11?

The most common reason to file for Chapter 11 is the threat of loss of valuable assets through foreclosure or repossession. However, there are many reasons these two things can threaten your livelihood:

  • Litigation
  • Foreclosure
  • Repossession of assets
  • Cash shortage 
  • Slow paying customers 
  • Tax issues 

Is my business a Good Candidate?

We get this question a lot. The question we pose in return is, “Do you feel that a core business could be preserved if you have a period where you can reorganize your financial situation?” If the answer is yes, then we feel it’s worth it to file.

To put it simply, Chapter 11 can be a valuable second chance for individuals and companies that feel like they could use one. For individuals, the spirit of that question stays the same; is your personal property being threatened, and do you feel you could preserve the ownership of that property if you had a little more time to reorganize?

Are you a candidate for a small business chapter 11 under Subchapter V

If your total debt is below 7.5 million ( secured and unsecured combined) then you could be a candidate for Subchapter V of Chapter 11 which can be a less intrusive method of proceeding through bankruptcy.  The costs associated with subchapter V are lower and the time you are in bankruptcy are greatly reduced.  Every entity considering filing a Chapter 11 should consider whether a filing under Subchapter V is an alternative.  

How Long Does It Take?

The timeline of Chapter 11 can vary based on the current caseload as well as the complexities of your case. We’ve seen Chapter 11 cases get approved in 2-3 months, and some can take longer. 

How Long Can I Be Under Chapter 11?

The short answer to this question is “indefinitely.” The longer answer is that will depend you will receive clear guidance from a bankruptcy court. That means your successful filing of Chapter 11 bankruptcy comes with oversight as well as an expectation to reorganize and rehabilitate your finances. 

Are you interested in filing for Chapter 11 Bankruptcy? Let us help you navigate this challenging time. Reach out to us today.